The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government and financial markets for bolder action, but disappointing investors who had set their hearts on more audacious measures.
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The Bank decided, by a 7-2 majority vote, to continue applying a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank.
JAPAN-ECONOMY: Japan’s central bank opted Friday for a modest expansion of its lavish monetary stimulus to help perk up sluggish growth and combat deflation.
Expectations of further stimulus in Japan has dominated trading for the past few weeks and increased yen volatility before the BOJ is due to conclude its two-day meeting on Friday.
Retail sales dropped 1.4 percent in June from a year earlier.
The U.S. dollar fell more than a full yen on Friday at one point to as low as 102.825 and the Nikkei average tumbled almost 2 per cent, after the BOJ’s decision fell short of expectations. Through aggressive easing and a Halloween shock in 2014 and another stimulus round in 2015 the central bank has only been able to keep up with the volatile forex market.
KEEPING SCORE: Japan’s Nikkei 225 was down 0.3 percent at 16, 411.39.
MSCI’s broadest index of Asia-Pacific shares outside Japan pulled back 0.3 per cent after hitting the highest level since August 11, leaving it on track for gains of 1 per cent for the week, and 5.5 per cent for the month.
Many economists, though, had already concluded that the BOJ had reached its policy limits, and had little or no ammunition left to fire.
The yen rose 2 per cent against the U.S. dollar, the Guardian reported.
The results of “stress tests” on the 51 largest euro-area banks will be published after USA markets close and it remains to be seen whether the results will boost confidence in European banks.
Wall Street shares remained near all-time highs, with tech heavyweights Alphabet GOOGL.O and Amazon AMZN.
Mitsubishi Estate Co fell 2.6 percent and Mitsui Fudosan Co shed 2.0 percent. It is down 7.6 percent this week and 15 percent this month.
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Among other markets, Sydney fell 0.3 per cent, Seoul sank 0.1 percent and Singapore tumbled 1.1 per cent. Hong Kong fell 0.8 per cent and Shanghai sank 0.1 per cent at the break, before the announcement. Brent crude, used to price worldwide oils, fell 32 cents to $42.91 in London. The BOJ said there were risks to achieving its 2 per cent inflation target within its latest time frame – sometime in the 12 months to the end of March 2018 – and that it took action to ward off a decline in business and consumer sentiment.
